#primary surplus

Greece’s economy will contract by 4.7% in 2020 due to the pandemic crisis but it will return to positive growth with a rate of 5.1%, the Finance Ministry said in its reform program sent to the European Commission in the framework of the European Semester.

Unemployment is expected to reach 20%, the program predicts among others. adding that due the lockdown private consumption, investments, imports and exports are expected to drop significantly.

According to the ministry, the Greek economy suffers a triple shock: one temporary but very strong shock in supply. The lockdown reduces production of goods and services, along with incomes of producers and labor forces, a very strong shock in demand as the lockdown reduces consumption and a very strong shock of uncertainty since both the duration and intensity of the phenomenon were unknown.

1. The reform program envisages a 4.7% economic recession in 2020 based on the assumption that a healthcare crisis will gradually recede after the first half of 2020, with the economic impact expected to be visible in the second quarter of the year. The economy is projected to recover with a 5.1% growth rate in 2021.

2. Unemployment rate is projected to rise from 17.3% in 2019 to 19.9% in 2020 and to fall to 16.4% in 2021.

3. Private consumption is expected to fall by 4.1% this year reflecting losses of income and a suspension of consumption spending due to measures to restrict social contacts. Consumption is expected to grow by 4.2% in 2021. On the other hand, public consumption is expected to grow by 1.0% due to increased state spending.

4. Inflation rate is expected to return to 2019 levels (harmonized consumer price index) to -0.3% in 2020, rebounding to 0.6% in 2021.

5. Private investments (gross fixed capital formation) are expected to fall by 4.6% and to jump by 15.3% in 2021.

6. The state budget’s primary surplus is expected to significantly fall short of the 3.5% of GDP aim for 2020.

EU finance ministers decided on Monday evening to scrap the primary surplus target of 3.5 pct of GDP for Greece this year in the face of the coronavirus pandemic.

“Today’s [yesterday’s] decisions fully meet Greek positions and priorities,” Finance Minister Christos Staikouras said following a Eurogroup video conference on the economic response to coronavirus.

In particular, Greece has secured fiscal flexibility similar to that applied to all eurozone member-states, as noted by Eurogroup President Mario Centeno.

“We all agree that of course Greece will also be able to make full use of the flexibility with the fiscal rules to deal with the consequences of the coronavirus,” Centeno said.

Asked about fiscal restraints in Greece as a result of post-program surveillance, Staikouras noted that “we have decided to make full use of the flexibility available to all member-states.”

The Greek people have just lived through a Depression as deep as the Great Depression and considerably longer. It is now the greatest recorded peacetime Depression.

Fortunately, the Greatest Depression may now have run its course. The Greek economy grew by 1.4% in 2017, and the IMF projects that GDP growth will rise to 2% in 2018 and 2.4% in 2019.

In May 2026, tax revenue was €5,454 million, up €375 million or 7.4% on target – At €834 million, revenue refunds The execution of the state budget in the five months of January-May 2026 exceeded the targets. According to the provisional data of the Ministry of National Economy and Finance, the budget showed a primary surplus of 3.638 billion euros against a target for a primary surplus of 1,243…

Greece’s central bank has slashed growth projections for the Greek economy to 0 percent from a previously estimated 2.4 percent this year from the impact of the coronavirus outbreak, it said on Friday.

In a report, the bank said it was its baseline scenario. The impact of the health crisis was impossible to specify since the pandemic was ongoing, it said. Its impact assessment took into account recent measures announced by the government to shore up the economy.

Greece has already unveiled measures worth 3.8 billion euros to protect workers and businesses from the fallout due to the novel virus. On Thursday, it said it would spend another 3 billion euros from the budget and an equal amount from EU structural funds.

The country’s finance minister had on Wednesday also said Greece was looking at zero growth this year, from the government’s own previous estimate of a 2.8 percent expansion in output.

The 2020 draft budget was submitted to the Greek Parliament by the Finance Minister, Christos Staikouras, on Monday. The draft foresees an economic growth of 2.8% and a primary surplus of 3.56% of GDP.

Key points of the draft budget 2020:

It  envisages a reduction in the unemployment rate to 15.6% of the workforce in 2020 from 17.4% in 2019.

Increase in private consumption by 1.8%

Increase of investments by 13.4%

Investment and private consumption are expected to support higher growth rates.

Head of IMF’s Europe department “Poul Thomsen suffers from short-time memory loss,” said Syriza MP and former finance Minister Euclid Tsakalotos. He was commenting on Thomsen’s claims that the Greek government agreed to high primary surpluses targets during the negotiations in the first half of 2015. Greeks accepted the high surplus targets in order to “impress European countries on Greek determination,” Thomsen claimed.

Speaking at the London School of Economics about the Greek crisis and the role of the IMF,  Thomsen admitted that “mistakes were made in the Greek rescue program,” and that they were “too optimistic with their calculations.”

The future President of the European Central Bank, Christine Lagarde, suggested that the Greece’s commitment to a 3.5% of GDP primary surplus target is “excessive” and should be reviewed.

Lagarde made this statement during her hearing before the Committee on Economic and Monetary Affairs of the European Parliament in Brussels on Wednesday.

Asked about the IMF’s standard position on Greek surpluses and to what extent she will defend this from the position of ECB President, Lagarde said that the IMF’s view and hers, still speaking from her position in the IMF, is that the 3.5 pct primary surplus for Greece is excessive and puts too much pressure on the recovery of the Greek economy.

Primary surplus at 1.2%-2% would help Greece to grow, she added among others.